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Finally, there's this grim fact: Millions of Americans still struggle to put a roof over their heads. The National Low Income Housing Coalition reports there's not a single American community in which a minimum-wage worker can reasonably afford to rent an apartment.

Sums of federal housing assistance do flow – some through public housing and federal Section 8 renter subsidies. But the vast majority of federal housing expenditures – roughly $80 billion a year – finance the home mortgage housing deduction. Only 30 percent of taxpayers use it. Applicable to homes worth up to $1 million, it overwhelmingly benefits the richest Americans.

So – assuming Fannie Mae and Freddie Mac can be stabilized – where do we go from here?

Tackle the mortgage deduction head-on, counsels Bart Harvey, recently retired chairman of Enterprise Community Partners, a major national nonprofit that helps finance housing for low-income families. “Even in a time of fiscal distress, it can be done,” Harvey told a National Housing Conference gala.

The federal dollars now used for the deduction, said Harvey, could be shifted to people in real need of housing. One suggestion is to convert the deduction into a straightforward tax credit for low-income renters, or to benefit middle-income renters or homebuyers in highly inflated local housing markets.

But at the same meeting where Harvey spoke, staffers from the Senate Banking Committee told me it would never happen – that the resistance of homebuilders and the real estate industry is so fierce that the deduction is an untouchable “third rail” of American politics.

Maybe so. But it's also true that in 2005, President Bush's bipartisan Advisory Panel on Federal Tax Reform endorsed converting the mortgage deduction to a less regressive tax credit. And our demographics are changing. A big wave of “millennials” – would-be homeowners in their mid- to late-20s – is now fast approaching, notes John McIlwain, the Urban Land Institute's top housing expert: “If they received a benefit, there'd suddenly be a huge rise in housing demand – which the homebuilders should be ecstatic about.”

Assist low-income renters

Right now, Congress has an opportunity to help low-income renters by approving the national affordable housing trust fund. It provides a significant new opportunity to assist low-income renters, with funds from the Federal Housing Administration and contributions by Fannie Mae and Freddie Mac (when, hopefully, they're back on their feet).

A next big breakthrough would be to restore HUD, now thoroughly demoralized by scandals and the current administration's disinterest to its pre-eminence under such past secretaries as Carla Hills, Patricia Roberts Harris, Jack Kemp and Henry Cisneros. Imagine the next president appointing a forceful ex-mayor such as Tom Murphy of Pittsburgh, an urban policy whiz such as Bruce Katz of the Brookings Institution, or a seasoned housing professional such as Harvey. With a will, we could have top-notch leadership and a rejuvenated agency staff focused on a full spectrum of housing for all Americans.

Though maybe with a caveat – to rename HUD the Department of Housing and Metropolitan Development, suggests McIlwain. Why? To think more expansively, to make connections, he says: “No other developed country lacks a national policy on cities, recognizing the vital importance of urban regions. We need such a policy – and department.”

Build in anti-sprawl incentives

Incentives for coordinated development could be built not just into housing, but also highway or transit bills, requiring our nationwide set of metropolitan planning organizations to take on land use, working with city and suburban governments to limit wasteful outward sprawl of regions.

But a HUD focused especially on cities and housing could be a special steward of the new relationships, providing incentives for core cities and suburbs, which increasingly need housing supports, to work together.

Plus, a new HUD could watch to see that housing has meaningful income mixes and that it works hand-in-glove with transportation – making sure, for example, that when federal housing dollars are used, there will be upgraded zoning around highway interchanges or transit stops, providing higher density, more energy-efficient and socially inclusive housing together with job-providing commercial development. That way, isolated housing “projects” for the poor and federally financed roads to developers' greenfield projects would be history.

We could do all these exciting things. But first, we'll have to make some smart choices – candidates with vision, and some tough political hides – in the November elections.